Market/Finance News Blog: Switching up Australia's foreign investment policy

By the resi financial blog team, 03 March 2015

Market/Finance News Blog: Switching up Australia's foreign investment policy

Offshore investment is a big driver behind the Australian economy. Not only does it help development, but it supports the residential and commercial property markets, creates jobs, bolsters profits and keeps up a healthy level of construction. 

However, with interest rates plummeting and a low Australian dollar, the Federal Government has released plans to strengthen the policy framework surrounding foreign investment in residential real estate. Prime Minister Tony Abbot and Treasurer Joe Hockey noted that the framework needs to tighten around compliance and enforcement in particular. 

The Options Paper raises the possibility of an application fee on residential property investments, which would give the Australian Tax Office (ATO) the resources it needs to follow up instances of non-compliance. The proposed fees would include a $5,000 levy for residential properties under $1 million, $10,000 for properties worth $1-2 million and a further $10,000 for each additional $1 million. The ATO will also have a special branch for investigating instances of non-compliance. 

However, the policies are still open to change. The Government is welcoming all submissions until March 20, after which they will make their final decision.

Property Council of Australia warns that this fee could discourage foreign investors and undermine the housing market - which would be disastrous for economic growth. 

"Foreign investment – be it from the UK or China – underpins new residential housing supply in Australia," Chief Executive Ken Morrison said in a February 27 statement.

"And without strong supply to meet the demand from our growing population, prices in already tight markets, like Sydney, are just going to rise."

It will be an interesting few weeks ahead. There has been some controversy around whether foreign investment pushes up house prices, but the outcome of these policy changes might give an answer. In any case, investors and homebuyers should keep an eye out for any developments in this area. 

If you want to know more about your investment options, or have any questions about your unique financial circumstances, get in touch with the loan specialists at resi today.

Categories: Property Investment